EricEwe.com

The Chicago Tribune reported today that Google’s bid for Groupon fell apart when Groupon rejected the internet giant’s offer. Initially, Yahoo tried to buy Groupon at half that amount and failed too. It is said that Groupon might be looking at an IPO in 2011.

Amazon is also looking to buy Groupon’s closest competitor for less than $200 milion.

Groupon’s business model is pretty solid as they keep 50% of the revenue that they generate online. I.e. If they sell a $50 value gift cert at GAP for $25, Groupon would make $12.50 off each the certificate that they sell and GAP gets $12.50.

The bigger question is, what value does that create for merchants other than a potential new customer. In the case of GAP, are they really generating a new customer?

I for one have bought from GAP and am a regular customer. Is it a good deal for me, “Yup” as you get to stretch your dollar further by 100%.

As for GAP, I doubt that they get new customers because at one time or another, one have bought from them.

On the flip side of things, I think it is more of a PR to generate buzz, but at what cost? Brand image – because now GAP is being associated as a discounter? Cash flow – because selling a $50 gift cert for $12.50, or at 75% off.

At the end of the day, it is Groupon and the consumers that are coming out ahead while the merchant is getting short changed.